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The Last Recession? Or Our Best Opportunity for Hope?

As the drama of the bursting bubble of Wall St. gives way to a slower, but steady and painful, economic decline, the first and most important question we should ask is "Should we try to blow another bubble, or should we reject bubble culture values for something entirely different?"

If we agree that we need a new culture, this leads to the question "Can we take advantage of the opportunity afforded by this collapse, by the exposure of a failed system, to establish new "rules for the house" (the root meaning of "economy" from the Greek)?"

If the house, metaphorically, is Planet Earth the way we have enjoyed it for millennia, then making the choice now to change to a sustainable economy is the best way to turn the apparent lemon of this economic contraction into the best lemonade in history.

The current economic contraction has been developing for almost 20 years, and for the last four or five has appeared inevitable to anyone not under the spell of the "free market" fantasy. It is the result of an economic system which was able, briefly, to ignore and disregard its natural limits and restraints. Finite resources were seen as infinite entitlements. Politicians, businessmen, and intellectuals of all stripes and ideologies shared a complete failure to understand the material basis for their apparent prosperity, arrogantly claiming to be its controlling agents, rather than understanding a unique and lucky combination of cheap energy, political alignments, and misunderstood technology as the basis for their dizzying growth. The few economists and others trying to call attention to its faults were drowned out by those focused on the immediate financial gains.

Free market economists preached faith in the "market+technology" as the solution to all social ills, and with the zeal of the Inquisition and the power of the the US military swept away all opposition. Despite the humanist traditions of western religions, including Christianity, money became the mark of righteousness rather than corruption, and calls for humility, service, and modesty earned more ridicule than the crucified Jesus endured from the rabble of Jerusalem.

For the last 20 years, there has been no ideology or political force able to challenge this blind faith in the "grow-for-broke" materialism of the US led global economy. In a contest for real power in the world, those favoring sustainable, long-term solutions have been overwhelmed by the very well-funded hucksters of the short-term miraculous economy.

The difficulty of shifting over to a sustainable economy is that it requires a change of values. The technology is already there. The resources are at hand, all around us, many of them locked up in gaudy constructions and machines, which will be exhibits in the museums of the future of our species-wide intoxication. As we begin to sober up and realize we don’t need this “stuff” to make our lives meaningful or secure, we have yet to begin transitioning to an economy that values not convenience, but community and sustainability.

One thing that may make this transition easier is that, whether we like it or not, this is the final recession of this system. Along with the peak of oil production, now visible in our rear view mirror, capitalist expansion is done. The slope down will not be uniform, there will be upticks along the way, and regional variations, but the peak is past. There is only one way to go, and it's down.

This has been predicted before, beginning with Marx in the mid-1800's and by many others, often technology believers of the socialist sect. They have always turned out to be wrong.

Why then, do I claim confidence in making this statement now?

Because the systemic feedback loops of the interconnected global economy have begun to change direction. The processes that required growth are now reversing and gaining moment to destroy what they have grown. While national trajectories will vary based on local conditions, the stitching together of a just-in-time world economy in the last two decades has left few regions or cultures independent enough to be unaffected. No longer does any country integrated in the global market place have the luxury of collapsing or prospering on its own.

There are two key processes which now are combining to terminate the system, one is physical, the other is the rationale of the system itself.

Diminishing returns on depleted resources

In high tech societies, ever-greater inputs are required to maintain production at constant levels, and geometric increases are necessary to increase production. Whether mining iron ore from mountainside, petroleum from a well, or corn from a field, the energy cost continues to rise per unit of production. When one product depends on another, the increased costs are multiplied together in the final product. The price of corn, for example, is a product of the cost of seed, machinery, fuel, water, fertilizer, and pesticides, and labor. The depletion of phosphorus and natural gas are pushing up the price of fertilizer and pesticides, while industrial farming's depletion of the soil increases the demand for these chemicals per bushel of harvested grain. There is a constantly diminishing return on energy invested, so the cost of production continues to increase at an accelerating rate. Several key resources for industrial agriculture have probably passed their peak production, including petroleum and phosphorus, and water is being mined and consumed in ways which are unsustainable.

Financial return on investment

The modern capitalist system is based on the premise that tomorrow's economy will be larger and more productive than today's. Investments are made on the basis of expected returns. The original investment is expected to grow, whether as increased stock and bond values, or just by accumulating interest. If real growth doesn't exceed the rate of monetary inflation, then there is no incentive to invest. When the system appears not to be growing, the prudent capitalist neither lends, invests in new equipment, nor produces goods or services, the purpose of all that activity is to multiply his money. The creation of goods and the provision of services are means, not ends.

The principle of diminishing returns obviously stands the financial premise on its head. It predicts that for each additional quantity of money invested, fewer products will be produced. No "rational" investor would deliberately invest in diminishing returns.

If we grow corn organically, we are understanding that our harvest of corn represents the effect of solar energy on the continually recycling elements of air, water and soil. We recognize that we are part of that cycle of life, and we return to the cycle anything we borrow from it for our own enrichment. We can go on from generation to generation without diminishing returns. Neither can we indefinitely increase the production from a given acre of land after rather quickly arriving at a plateau of sustainable production based on the specific conditions of that acre. A sustainable process, then is not a good investment from a capitalist point of view.

Growing corn industrially, where barrels of non-renewable fossil fuels are burned for every acre harvested, and tons of nitrogen and phosphorus are swept with the soil down the Mississippi to be lost on the bottom of the Atlantic has, for a few decades, allowed us to produce more corn per acre. Its been a good investment. Ultimately, however, these practices will leave us with an unproductive desert. Over a longer time frame, the net production by organic methods will be greater, although no money will accumulate.

Speaking generally, as we bump up against the limits of resources, there will be no incentive to invest. As long as those economic decisions are made based on the expectation of increased monetary return, investment will continue to decrease as resources deplete. There will be nowhere for investor's dollars to go, the markets will crash at an accelerating rate, and nothing short of a government takeover to socialize the losses could stop the bleeding.

But, if depletion of resources increases their value, won't that stimulate the market to invest in their production or an "economic" substitute? I.e. Won't expensive oil just encourage the production of more oil or 'alternative fuels'?

No, for two basic reasons.

1.The cost of production will always increase as fast, if not faster than the value of the commodity. (At this stage of depletion and given the capital intensity of modern industry, reduced labor costs drops out of the equation as a significant factor). I.e. Dredging oil out of the far corners of the earth may not be a safe risk for investment dollars, no matter the price at the pump.

2.As general depletion expands, the consumer demand for all goods will continue to decrease, because money to spend (wages) will continue to fall behind the rate of inflation.

“Depletion economics” makes no sense at all under market theory, but it suggests that any "recovery" within the market economy model will be short-lived, and will promptly sag under rapidly increasing prices for resources.

The fact that the system is in terminal decline does not mean that its negative impact on the world, from the point of view of future human generations, will necessarily decrease. Although less oil may be pumped, deforestation, a low tech method of gaining some amount of combustible fuel, could increase. This is one example of why a change in values is so critical.

So what's our alternative?

Shift our values to a sustainable model, where growth is not a primary goal or an unqualified good. Let's make our "investment" decisions based on what will be sufficient to meet our human needs for physical security, social justice, and cultural enrichment. Central to this model is the determination that all our strategies, and the goals we seek, must be within the limits of our resources such that projected over the uncountable generations, they must not deprive us of the ability to sufficiently meet our basic human needs. As outlined above, the principles and practices of capitalism cannot deliver this kind of model.

Some things may need to grow, such as the number of skilled organic farmers, carpenters, wind turbine engineers, nurses, herbalists, railroad conductors, musicians, and bicycle mechanics. Other things which are already beyond the limits may need to be abandoned or reduced. My suspicion is we won't need them. We won't need skyscrapers, private automobiles, armies of financial analysts, stockbrokers, realtors, public relations flacks, or soldiers. (Not that any of these people would be unemployed; the muscle power needed to replace the machines we can no longer sustain will provide honest employment for all.)

Don't Bail Out this System – Let Us Bail Out of It, Altogether

We have already seen the federal government generate $1 trillion in an effort to blow another bubble. There will be additional requests for bail outs and "economic stimulus". The instinct that led the overwhelming majority of Americans to oppose the Wall St Bailout of early October is the foundation on which to organize. We must demand that all future efforts at solutions build new values of economic justice, sustainability, and sufficiency into all policies and appropriations.

Let's make this recession the last, by changing the rules for the future we all deserve. The Green For All initiative led by Van Jones, and the Transition Town movement originating in Great Britain but now gaining interest in the US, are two of the most exciting efforts at sustainable solutions. Check them out at www.greenforall.org and www.transitionculture.org

With unfootnoted thanks to (alphabetically) Colin Campbell, Herman Daly, Richard Heinberg, Rob Hopkins, Van Jones, Howard Odum, Joseph Tainter, and many others.

Author Silberman is a full time union organizer in his day job. He has been involved in various projects including organizing a peak oil conference in the city, and a mayoral forum on energy and global warming. Please see his previous articles here and here.

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